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Today's Law: 2008 Tax Breaks, Unpaid Gratuities, and Extraordinary Circumstances and Child Custody
January 15, 2009
by Forsyth & Forsyth TODAY'S LAW
Newsletter for clients of Forsyth & Forsyth January 15, 2009 No 88
2008 Tax Breaks
In 2008 Congress twice passed bills that included tax breaks for individuals. Some were extenders of previously enacted breaks that expired in 2007 and some were new. A highlight follows:
• If you use the standard deduction and pay property taxes, you can increase the amount of your standard deduction by $500 ($1,000 for joint filers).
• If you are a teacher and spend out-of-pocket for classroom expenses, you can deduct above-the-line up to $250 of the expenses. This is an extender.
• If you pay tuition and earn less than $65,000 ($130,000 for joint filers), you can deduct above-the-line up to $4,000 of the tuition. This is an extender.
• If you are more than 70½, you may distribute up to $100,000 from an IRA directly to your favorite charity. You will not be deemed in receipt of the money. Yet, you may count the money toward your required annual minimum distribution. You cannot make such a distribution to charity from a 401(k) or other retirement plan. This is an extender.
• Starting in 2011 brokers will be reporting to the IRS your cost basis in securities acquired and sold after 2010. Congress estimated that this change will generate $6 billion in underreported tax over ten years.
• The $500 credit for energy efficient improvements to existing homes has been renewed for 2009 but not 2008.
• If you bought your first home after April 8, 2008, and before July 1, 2009, you can claim a credit for 10% of the purchase price, not to exceed $7,500. The credit phases out above $75,000 of income ($150,000 for joint filers).
These breaks will pale next to the tax relief to be considered by Congress as part of President-elect Obama’s plan to stimulate the economy.
If the task of preparing your income tax return seems daunting, we have the software and the knowledge to help you out.
Unpaid Gratuities
You host an event at a restaurant or stay at a hotel and receive a bill that includes a 20% gratuity. Or the addition may be labeled a service charge. The contract may not say so but somebody told you that the money would go to the wait staff.
Ever wonder whether the wait staff did in fact receive the gratuity/service charge? If the staff did not, does it have a remedy?
Fortunately, in New York we have a statute which forbids an employer from taking from an employee any gratuity paid the employee or retaining “any charge purported to be a gratuity for an employee.”
In a recent case a cruise line argued that a charge on a banquet bill is not a gratuity if its payment is mandatory. In the alternative, the cruise line could charge customers a flat fee for a dinner and remit to the wait staff whatever portion of the fee that the cruise line wanted as a gratuity. Needless to say, what it remitted was very low, 4-7%.
Surprisedly, the cruise line prevailed at the trial court and the first appeals court. However, when the case went to the Court of Appeals, our highest court held for the wait staff.
The Court of Appeals adopted a reasonable patron standard. A charge, separately itemized or not, is a gratuity if the service-provider leads the patron to believe that the event or meal price includes a percentage as a gratuity. The mandatory nature of the charge is irrelevant. The expectations of the patron also determine the amount of the gratuity to be paid the staff.
The staff must be employees of the service-provider. If the staff are independent contractors, they cannot take advantage of the statute.
An aggrieved employee does not have to go to court by himself or herself. He or she can file a complaint with the Attorney General or the Department of Labor. Both state agencies supported the staff in the cruise line case.
Extraordinary Circumstances and Child Custody
Typically, a mother or father has a superior right to custody of their child in a contest with a non-parent. If the non-parent establishes what the courts call ‘extraordinary circumstances,” the non-parent may obtain custody. Extraordinary circumstances exist when the parent surrenders, abandons, or neglects the child or proves to be unfit as a parent.
A recent case illustrates a common fact pattern. When a child was four years old, the parents allowed the child’s aunt to take care of the child. Seven years later the mother went to court to try to regain custody. The court held that the long interruption in care was extraordinary circumstances.
The aunt had provided a stable, nurturing, and supportive home. The child was thriving with the aunt and would have risked emotional harm going back to the mother. The court determined that the child should stay with the aunt, whom he had bonded.
The Senior “Partner”
Donald, Scott and George’s father, is doing very well. He turned 87 in October. Some of you see him at Rotary, the RPO, or the local bridge table. In the middle of February he embarks on a thirty-day cruise, starting in Kenya and ending in England via the Suez Canal. He will be sailing through the Gulf of Aden. He is not fearful of the pirates. In WWII he served as a deck officer, packing a 45 at times (never used). He will tell the captain of his cruise liner that he can serve in this capacity again.
Anniversary of Move
It has been almost one year since we moved into the historic Powers Building. We love it here and retrospect wish that we had moved sooner. Our space is new and better arranged to meet our needs. Parking is handy in the Sister City Garage and reasonable (the first hour is free). The building has a beautiful atrium. There are empty offices but we hope that the landlord can fill them. Please ask for a tour the next time you visit us.
If you have any questions about income taxes, compensation, child custody, or any other matter, please contact us.
FORSYTH & FORSYTH
16 W. Main Street, Suite 110
Rochester, NY 14614
(585) 262-3400
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